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MENA Adults More Tolerant of Reforming Nonfood Subsidies

by Joana Silva, Victoria Levin, Matteo Morgandi, and Cynthia English

If fuel subsidy cuts occur, many want savings to go to the poor, services

This article is the second in a two-part series on social assistance in the Middle East and North Africa (MENA) region based on data collected for the new World Bank MENA Development Report, "Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa."

WASHINGTON, D.C. -- Residents in Egypt, Jordan, Lebanon, and Tunisia would prefer seeing cuts to certain fuel and tobacco subsidies rather than food subsidies if their governments could no longer afford to fund all of the subsidies they currently do. A large majority of residents in Lebanon (88%) would be most in favor of removing tobacco growers' subsidies. In Egypt, Jordan, and Tunisia, residents are most likely to say they would rather their governments cut fuel subsidies than other subsidized products such as food. Fewer than 10% of respondents in each country chose removing any food subsidy.

Still, among the four countries surveyed, residents in Jordan and Egypt are the most likely to oppose reforming any existing subsidies. Six in 10 Egyptians and nearly half of Jordanians (47%) did not identify a product for subsidy removal. More than a quarter of Tunisians (27%) and 5% of Lebanese did not select a subsidy to cut. See page 2 for full results.

The findings reflect more than 4,000 interviews with adults, aged 15 and older, that Gallup conducted in Egypt, Jordan, Lebanon, and Tunisia in fall 2012 for the World Bank's MENA Development Report, "Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa." (The full report is available in English and an overview can be accessed in English, Arabic, or French.)

Universal price subsidies, particularly on food and fuel, have long been a popular method intended to support the welfare of residents in the MENA region. However, such subsidies are typically costly. The average country in the region spends 5.7% of GDP on maintaining low prices for these products, while an average benchmark country spends 1.3% of GDP on these subsidies.

Additionally, fuel subsidies in particular are not necessarily highly efficient at helping the poor, according to the new World Bank report. For example, in Egypt and Jordan, the richest 20% of the population reap the majority of the benefits from fuel subsidies, but many people in the MENA region currently rely on subsidies to stay out of poverty, and thus, reforming subsidies is a complex matter.

Despite the difficulties, several countries in the MENA region are considering or have recently reformed their subsidy systems.

Most respondents in all four countries say that if their governments were to remove subsidies on diesel or fuel that the savings should be distributed to the poor and to improving social services. At least half of respondents in Lebanon, Egypt, and Tunisia say the savings from stopping fuel subsidies should be distributed as cash transfers to the poor and increased spending on healthcare and education. About a third in these countries, and half in Jordan, say the savings should be distributed to only poor families.

A majority of respondents in Egypt and Tunisia indicate that they would be willing to support removing diesel subsidies if the government offered to put the savings from removing the subsidies toward the distribution methods they preferred out of the four mentioned.

Notably, more than two-thirds of Tunisians and 59% of Egyptians who opposed any subsidy removal when originally asked about it would support removing the diesel subsidy if the savings were to be distributed to the poor or to the poor and to education and healthcare spending. More than 20% of Lebanese and Jordanians who initially opposed the idea of any subsidy reform would also support fuel subsidy reform under the same conditions.

Implications

The finding that residents in Egypt, Jordan, Tunisia, and Lebanon are less averse to reforming fuel than food subsidies provides a valuable signal to policymakers considering how best to structure the potential reform.

When considering subsidy reforms, governments can protect the poor from the potential adverse effects of the reforms and increase residents' support of them if they can commit to a compensation strategy that residents support such as targeted assistance to the poor and improvement of social services like health and education.

For complete data sets or custom research from the more than 150 countries Gallup continually surveys, please contact us.

Survey Methods

Results are based on face-to-face interviews with 4,061 adults, aged 15 and older, conducted in September-December 2012. For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error ranged from ±3.4 percentage points to ±3.7 percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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